IMF Nigeria
Nigeria President, Muhammadu Buhari

Summary

  • IMF which met Nigerian authorities in January said the West African country needed to boost taxes to meet the twin shocks of the oil price crash and Covid-19 shocks
  • Kenya is waiting its turn to meet the IMF board seeking approval of a $2.3 billion (Sh250.4 billion) loan facility for budget support.

The International Monetary Fund (IMF) has asked Nigeria to double its Value Added Tax (VAT) over the next four years to boost revenues to fund post-coronavirus recession.

The Fund which met Nigerian authorities in January said the West African country needed to boost taxes to meet the twin shocks of the oil price crash and Covid-19 shocks.

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“The Nigerian economy is at a critical juncture. Policy adjustment and reforms are urgently needed to navigate this crisis and change the long-running lackluster course,” IMF said.

“In light of high poverty, staff recommended revenue measures that are progressive and efficiency-enhancing, drawing on previous IMF technical assistance recommendations (text table). These include increasing the VAT rate to at least 10 percent by 2022 and 15 percent by 2025,” the Fund said.

Kenya is waiting its turn to meet the IMF board seeking an approval of a $2.3 billion (Sh250.4 billion) loan facility for budget support.

East Africa’s biggest economy has applied for the extended Fund facility program to support the next phase of Kenya’s response to COVID-19 including an initial disbursement of $725 million (Sh79 billion) in the first half of 2021.

The loan will help the government fill the budget gap whose forecast for this fiscal year has been increased to 8.9 per cent (Sh1 trillion) of gross domestic product from 7.5 per cent (Sh841.06 billion) in June.

Kenya has already bowed to IMF pressure and revised corona tax relief on incomes, VAT and corporates as well as applied for debt restructuring under the G20 debt relief terms.

The country has not yet addressed how it is going to conduct fiscal consolidation which could either mean budget cuts or more taxes and restructuring of state owned entities that might render thousands of state workers jobless.

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